You’ve had to explain to your employees the concept of “no money”

You might be an entrepreneur if…you’ve had to explain to your employees the concept of “no money”.

In no way do I mean to ever insinuate that employees are not justified in demanding to be paid on time. That’s their right. It’s part of the contractual agreement between employer and employee unless specifically stated otherwise. An employee has every right to be peeved, even miffed, if they do not get paid on time. However, despite an employer’s best intentions and efforts sometimes there is simply no money. I’ve been in that position many a time, and on rare occasions I’ve had to deal with employees who weren’t just flustered, but who couldn’t quite grasp what I was telling them or didn’t seem to believe what I was saying when I said “There is no money.”

I think there is an assumption on the part of some people to assume that businesses and business owners always have access to cash, it’s just a matter of whether they want to hand it out. The facts are quite the opposite. More than likely an entrepreneur doesn’t have the cash, but he still hands out payroll checks anyway, hoping the cash will be in the bank by the time the checks clear. I wouldn’t be surprised if fully a fourth of the checks I’ve ever handed out over the past seven years have been distributed under this scenario, unbeknownst to my employees. I can’t count the number of times I’ve been $10K, $20K, or $30K short of making payroll on the day of payroll, only to receive the money I need on the day of or within a few days.

But I’ve also had payroll checks bounce, and I would rather not hand out a check than hand it out and have it bounce. Sometimes I don’t want to take the risk, which means explaining to one or more employees why their check will be late. Most of the time employees understand, even if they aren’t happy about it. But sometimes I get an employee who looks at me in disbelief as though I’ve willfully betrayed them. “What do you mean you can’t pay me on time?”

“I’m sorry, we’re expecting checks from clients but they’re taking long to get them to us than expected, and we don’t have any money in the bank. We should get the checks any day now and then we can hand out paychecks.”

“What do you mean there’s no money in the bank?”

“Just that, there isn’t any money.”

“Don’t you have a reserve for this type of thing?”

“No, we’ve never had extra money to create one.”

“Can’t you get a loan?”

“Already did, and spent it, and they won’t give us any more.”

“Can’t you borrow money from someone you know?”

“I already have, spent it, and they won’t give me any more. I don’t know anyone else I can go to.”

They eventually run out of questions, but I can tell they think that even though they’re not getting a paycheck that I’m still taking $10K home per month, or if I’m not this month I have for the past 12 months. At least that’s what I think they’re thinking, but maybe I’m paranoid. In the grips of my paranoia I’ll generally tell an employee who is asking these questions “Just so you know, I haven’t paid myself a dime in three years. I don’t get paid until everyone else gets paid.” That, of course, leads to another round of questions and disbelief from some, but not most.

My advice to employees is this–there is no such thing as a stable employer, so get used to the idea. The concept of a lifetime career is dead. Big companies aren’t necessarily any more stable than small companies. Novell has a billion dollars cash in the bank, and yet they have massive rounds of layoffs all the time. Other large companies take pensions away from employees who have worked with them for forty years. Companies with a lot of potential sometimes go out of business for one of a thousand possible reasons. If there’s any such thing as employer stability, it’s probably the government. If you want stability, go work for the post office or the IRS.

If you want to work in the private sector and do well, there’s only one way to find stability, and that’s through education, training, and skills. If you’re a really good computer programmer your employers might go out of business, but you’ll always be able to find a new job. If you’re a competent and organized office manager you’ll never lack for work. Basically, if you’re good at anything you can find work, no matter how bad the economy is (barring major catostrophes like a nuclear war, in which case all bets are off). Don’t depend on your employer to be stable, depend on yourself, because that will make you a better employee, and when your employer has to let people go, you’ll be the last one he lets go. And when he has money you’ll be the first one to get paid, and when the company does well hopefully you’ll be the first one to be rewarded with raises and bonuses. If your loyalty in down times isn’t rewarded during up times, that’s when I’d be quitting.